2019 ANNUAL REPORT · 2020-05-14 · 22 Access opyright – 2019 NNU REPRT Access opyright – 2019...

1Access Copyright – 2019 ANNUAL REPORT

2 0 1 9 A N N U A L R E P O R T

2 Access Copyright – 2019 ANNUAL REPORT

C O N T E N T S

4Chair’s Report

3 3Directors, Member Organizations and Executive/Management Teams

6President’s Report

1 2Innovation Report

1 6 Consolidated Financial Statements

8Legal and Advocacy Update

1 4Distributions and Financials

2 4Notes to the Consolidated Financial Statements

4 5Access Copyright – 2019 ANNUAL REPORT Access Copyright – 2019 ANNUAL REPORT

C H A I R ’ S R E P O R T

Cameron MacdonaldChair

A s Chair of the Access Copyright Board, I have a bird’s-eye view of the countless ways that Access Copyright’s staff are dedicated to serving Canada’s creators, publishers and content users. I see the hard-won successes, the commitment of the staff, and the positive momentum build for the organization with publishers and creators.

Underpinning the Access Copyright story is its unwavering dedication to flexible and easy content use for end users and fair payment to creators and publishers when their works are used.

It is the foundation beneath everything the organization is built on which is why it was encouraging that distributions from Access Copyright to rightsholders increased considerably in 2019. This was primarily the result of Access Copyright receiving full retroactive royalties from a major institution in the elementary and secondary school sectors for the years 2013 to 2017. Access Copyright continues to fight for similar treatment across Canada to restore royalties to their rightful levels.

While the total amount of distributions is still below what was paid out prior to the 2012 Copyright Modernization Act, it is a step in the right direction. We can be assured these funds will support creators and publishers and encourage the continued creation of Canadian content.

Underpinning the Access Copyright story is its

unwavering dedication to flexible and easy content use

for end users and fair payment to creators and publishers

when their works are used.

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Another promising sign was the conclusion of the Statutory Review of the Copyright Act.

The tenacity with which creators and publishers, and the organizations that represented them, brought to communicating their concerns over the impact of the interpretation of the education fair-dealing exception and the opportunity to address it bore substantial fruit.

The final reports tabled by the Standing Committee on Canadian Heritage, and the Standing Committee on Industry, Science and Technology both referenced the ways that much of the education sector has approached the exception as being questionable. In particular, the Shifting Paradigms report tabled by the Heritage Committee provides a clear action plan for a sustainable content ecosystem and cultural economy that benefits and supports creators and publishers, and students and teachers.

I am confident that Access Copyright’s unwavering work as a passionate advocate to push the government will continue to have meaningful impact.

Prescient, Access Copyright’s innovation lab, is busy getting ready to hit the switch to go live with the initial version of Fanship, which uses the power of personal recommendations by book lovers to fuel engagement with authors and fans as well as generate sales. It is one of the digital tools that Access Copyright and Prescient have been building. I am pleased to report that they have already met with great support from much of the publishing and creative community in their various development stages.

I am incredibly proud of the organization’s whole-hearted commitment to innovation and it was gratifying to see in 2019 that work take concrete shape as well as generate substantial interest and validation. Whether it was through coverage in The Globe and Mail, a grant from the Canada Council for the Arts or at conferences such as the International Federation of Reproduction Rights Organization AGM and the Blockchain Research Institute, the reception was always positive.

The end of the year—and the decade, for that matter—brought the release of the Copyright Board of Canada’s decision in the Access Copyright Post-Secondary Educational Institution Tariffs, 2011-2014 and 2015-2017.

While the decision is a welcome one and enables universities and colleges to easily copy and share content and ensure creators and publishers can be paid, the rate set for 2015-2017 is another clear demonstration of the impact to creators and publishers related to the education sector’s interpretation of fair dealing.

As I finish writing this report, the world is contending with the COVID-19 outbreak and Access Copyright, true to its mission and philosophy, is helping creators and publishers as well as the sectors it licenses to mitigate as much as possible the losses and upheaval caused by the virus.

You can be assured that Access Copyright remains committed to doing the heavy lifting necessary to support creators, publishers and content users.


P R E S I D E N T ’ S R E P O R T

Roanie LevyPresident and CEO

A s I write this report, we are collectively responding as best we can to the COVID-19 outbreak. Access Copyright staff is diligently working to continuously adapt and adjust how we work in order to continue to serve our affiliates, members and licensees during these unprecedented days.

Looking back on 2019, it started off with significant news for us at Access Copyright. In late spring, following countless meetings and presentations in 2018, the final reports for the

Statutory Review of the Copyright Act were issued by the INDU and Heritage Committees. While not perfect, we welcomed many of the recommendations in the reports, including their unease with the education sector’s approach and endorsing that creators and publishers, and education collectively work together to resolve their differences.

A few weeks later, on July 10th, The Globe and Mail ran a feature, highlighting the partnership Access Copyright and Prescient formed with Canadian Artists’ Representation/Le Front des artistes canadiens (CARFAC), Regroupement des artists en arts visual du Québec (RAAV) and Copyright Visual Arts to build Imprimo. It’s a tool that will allow visual artists to register their ownership and rights in their

work and will provide all those who deal with art a clear and definitive line of sight into the provenance of artwork. Around the same time, this important work received a generous grant from the Canada Council for the Arts

By fall our initiative to tackling the attribution problem and building tools that leverage cutting-edge technology to solve it for creators and publishers, and all those who depend on published works had gained substantial attention and notice at the Frankfurt Book Fair, in publications such as Publishers’ Weekly and even in Ottawa.

Aside from the innovation work, Access Copyright’s distributions to rightsholders rose substantially in 2019. In total, $11,298,513 was distributed to creators and publishers, compared to $6,983,313 in 2018. The primary driver for this increase were royalties collected from one major institutional user from the K-12 sector.

In December 2019, the Copyright Board of Canada released the Access Copyright Post-Secondary Educational Institution Tariffs, 2011-2014 and 2015-2017.

The decision brings certainty and clarity to universities and colleges for the copying and sharing of materials and the need to pay creators and publishers for the use of their work. But there are still some areas of concern.

The rates set by the Copyright Board for 2015-2017 reflect how the education sector’s interpretation of the education fair-dealing exception has created uncertainty in the market and substantially impacted the earnings and royalties of creators and publishers.

As well, the tariffs do not require that post-secondary institutions report what is copied under the tariff so that Access Copyright can directly compensate creators and publishers whose works are copied. We are looking at alternative ways to obtain data that will ensure royalties are fairly and reasonably distributed to rightsholders under the tariff.

Needless to say, there is still much work to be done.

Currently, priority number one is working to support our rightsholders and licensing communities during COVID-19.

From this vantage point, the phrase, or mantra if you like, we have adopted encapsulates perfectly why all of us at Access Copyright get up and come to work each day.

It’s only five words.

Because Paying the Creator Matters.

It motivates and inspires us to persist and move forward—proudly serving Canadian creators and publishers, and all those who value Canadian stories in both times of calm and uncertainty.

Access Copyright’s distributions to rightsholders rose substantially in 2019. In total, $11,298,513 was distributed to creators and publishers, compared to $6,983,313 in 2018.

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Image credit: Jennifer Rowsom Photography


Copyright Act Review

2019 saw the conclusion of the Statutory Review of the Copyright Act by the Heritage and INDU Committees.

Canadian creators and publishers were particularly pleased with the release of the Heritage Committee’s report Shifting Paradigms in May. The report was an important validation of the concerns of Canadian creators and publishers over the impact of the education fair-dealing exception. It also emphasized the negative ramifications of the education sector’s interpretation of it.

Among the 22 recommendations put forward by the Committee were the following:

• Amend the Copyright Act to clarify that fair dealing should not apply to educational institutions when the work is commercially available;

• Promote a return to collective licensing through collective societies;• Review, harmonize and improve the enforcement of the statutory

damages for infringement for non-commercial use in section 38.1(1) of the Copyright Act;

• Harmonize remedies for collective societies under the Copyright Act; and• Establish an artist’s resale right.

Following the tabling of the Shifting Paradigms was the release of the INDU Committee’s report.

Creators and publishers expressed a greater level of concern with the conclusions reached in the INDU report. However, two recommendations stood out as offering constructive steps forward. One addresses how to deal with education as a fair-dealing purpose and the other how to harmonize statutory damages for collectives.

• That the Government of Canada consider establishing facilitation between the education sector and the copyright collectives to build consensus towards the future of educational fair dealing in Canada.

• That the Government of Canada evaluate the forms of statutory damages available under the Copyright Act to a collective society or rights-holder who has authorized a collective society to act on their behalf where applicable royalties are set by the Copyright Board and the defendant has not paid them.

As creators and publishers, and Canada’s creative economy, deal with the unprecedented challenges brought on by the COVID-19 pandemic, Access Copyright has joined the rest of Canada’s creative community in supporting Canada’s creators and publishers, as well as content users in a variety of critically important ways.

L E G A L A N D A D V O C A C Y U P D AT E


I Value Canadian Stories

The I Value Canadian Stories campaign galvanized Canadians to take action in support of Canadian creators and publishers over the course of the Copyright Act review.

Since its launch in November 2017 to the end of the review in June 2019, over 2,500 letters were sent to key decision-makers to urge them to support Canadian stories and those who tell them. Over 4,500 uses of #IValueCdnStories on social media further amplified the message, and videos from creators such as Andrew Pyper, Amy Stuart, Sylvia McNicoll and David Chariandy brought a human perspective to the issues at play, and gave a look into the working life of authors and visual artists.

2019 Federal Election

During the fall election, Access Copyright collaborated with Music Canada to build a cross-industry coalition to gain support from the various political parties to commit to using Shifting Paradigms report as a blueprint for their cultural and copyright policy. In total, 44 organizations from across the country in the writing, publishing, music, visual arts, photography, performance arts, audio-visual and arts industries joined.

We also collaborated with Copibec, our sister organization in Quebec, on a shared letter targeted towards MPs and candidates in Quebec, outlining how our writing and publishing industry is negatively impacted by the education sector’s interpretation of fair dealing.

Additionally, we engaged with our affiliates during the election campaign by urging them to be politically active and encouraging them to vote. We also produced an election tool kit that outlined the various ways that they could make their voices heard.

Post-Secondary Tariffs

The Copyright Board of Canada released the Access Copyright Post-Secondary Educational Institution Tariffs, 2011-2014 and 2015-2017.

The Board certified the following rates:

Institution 2011-2014 2015-2017

Universities $24.80/FTE $14.31/FTE

Other post-secondary institutions $9.54/FTE $5.50/FTE

The Copyright Board of Canada’s decision certifies tariffs for the copying of published works in Canadian post-secondary institutions outside of Quebec from January 1, 2011, to December 31, 2017. It outlines the terms and conditions under which post-secondary institutions can copy works in Access Copyright’s repertoire as well as the annual rates for copying per full-time equivalent student. Until a new tariff is certified, the 2015-2017 tariff will remain in effect.

While the ruling brings needed clarity related to content use in post-secondary institutions, there are aspects of the ruling that are concerning.

The certified rates for 2015-2017 are another demonstration of how the interpretation of the education fair-dealing exception has impacted rightsholders’ royalties. As well, while Access Copyright currently has data that approximates what is copied in post-secondary education, the lack of reporting requirements under the tariff will require Access Copyright to seek ways to supplement that data to ensure that royalties collected under the tariff are distributed fairly to creators and publishers.

K-12 Litigation

In the legal action launched by the Ontario school boards and Ministries of Education, excluding BC and Quebec, against Access Copyright, we are currently in the document discovery phase. A representative sample of 530 schools, 65 school boards and all Ministries of Education involved in the litigation have been ordered to produce a broad range of relevant documents.

York University Appeal

We continue to await the decision from the Federal Court of Appeal in the York University appeal hearing, which took place on March 5 and 6, 2019. We expect the decision at some point in 2020.


In 2019 Access Copyright made tremendous headway in our innovation journey through Prescient, our innovation lab. The work underway through Prescient will provide our members and affiliates digital infrastructure and tools to ensure that lawful rightsholders are paid when their works are used in the digital environment powered by Web 3.0.

Our efforts have been focused on solving the attribution problem: the ability to connect a creative work to its lawful creator and rights owner in a reliable and authoritative manner. Simply put, the link between the digital version of a piece of content, the data attached to that work and the person or entity able to authorize use of the work is broken. Unless this is fixed, the future of digital interactions (sometimes called Web 3.0) will cement the existing challenges caused by the Internet: rampant piracy, monetization of content by someone other than the lawful owner and compromise the interests of the end users and content creators.

That’s why our efforts have been focused on building the Attribution Ledger, a verified digital fingerprint of a creative work that is connected to its creators and rights owners. Through the Ledger, we are moving towards our goal of solving the Attribution Problem and fixing the broken content link.

Additionally, we are exploring how might we use the International Standard Content Code (ISCC), developed through the Content Blockchain Project, to make the Attribution Ledger more robust.

In 2020, we will be focusing our efforts to create a global industry consortium to see how we might implement and obtain adoption of an Attribution Ledger-like system. This industry-led international task force will help define the specifics of the governance and future of the Attribution Ledger as it relates to authors, publishers and visual artists.

To demonstrate the value delivered by such an attribution system, we have built two services:

Fanship is a fan activation platform where authors and publishers can build their audience and grow sales by facilitating engagement with their fans to stimulate great book recommendations to friends, family and fellow readers.

Imprimo enables a digital passport for the art itself by providing the necessary digital tool that establishes a reliable, clear and transparent connection between an artistic work, its creator and the person or entity able to authorize the use of the artwork. It creates a verified record of creation so that artists can be properly credited and fairly compensated for their work. It is being built in partnership with Canadian Artists’ Representation/Le Front des artistes canadiens (CARFAC), Copyright Visual Arts and Regroupement des artistes en arts visuels

du Québec (RAAV) as a result of the grant received by CARFAC from the Canada Council for the Arts through its Digital Strategy Fund.

News coverage from publications such as The Globe and Mail, Publishing Perspectives, Publishers’ Weekly and Quill & Quire, and positive responses from organizations such as the World Intellectual Property Organization, the International Publishers Association, Canadian Heritage, the Association of Canadian Publishers, the Writers’ Union of Canada and many reproduction rights organizations from around the world have provided good momentum for our efforts.

The beta version of the Attribution Ledger, Fanship and Imprimo will be available to select set of creators starting in April 2020.

Whether you are an author or publisher who would like to add your eBooks to Fanship or a visual artist wanting to bring certainty to your authorship in your artwork through Imprimo or an organization that is working in the Web 3.0 space, we want to work with you.

Get in touch anytime by emailing us at [email protected].

I N N O VAT I O N R E P O R T


2019 Revenues

Access Copyright’s revenues for 2019 were $20.452 million, a significant increase of $8.932 million from 2018. The organization was able to recognize such a large revenue gain due to retroactive royalties from a major institution from the elementary and secondary sector, as well as increases in the majority of other sectors that Access Copyright licenses.

2019 Expenses

Access Copyright’s operational expenses for 2019 totaled $6.377 million, which represents an increase of over $1.676 million from 2018. This was anticipated as the organization’s innovation lab, Prescient, ramped up work on building the Attribution Ledger, Fanship and Imprimo, to ensure rightsholders are able to thrive in the Web 3.0 world.

2019 Distributions

Access Copyright’s distributions to rightsholders increased substantially in 2019. In total, $11.298 million was distributed to rightsholders, a considerable increase from 2018.

The primary driver of this increase was the payment of full retroactive royalties from a major institutional user in the elementary and secondary school sectors for the years 2013 to 2017. We are encouraged by this development that supports our creators and publishers who work tirelessly to create quality, relevant content for our classrooms, and will continue to fight for similar treatment across Canada to restore royalties to their rightful levels.

DISTRIBUTIONS AND FINANCIALS2019 Domestic Distribution (Millions)

This chart predicts the 2019 split in domestic distributions based on the results of the 2018 publisher royalty survey.

DOMESTIC$7.969M

PUBLISHERS’PORTION

$5.768M

PUBLISHERS’TOTAL

$4.200M

to CREATORSvia PUBLISHERS

$1.568M

CREATORS’TOTAL

$3.769M

CREATORS’PORTION

$2.201M

100%

53% 47%

2019 DISTRIBUTIONS AT A GLANCE

$11,298,513TOTAL DISTRIBUTIONS

32.6%$3,682,014K-12

19.12%

$2,160,325Post-Secondary and Title-specific

17.32%$1,956,546Creator Payback

16.34% $1,846,129Publisher Repertoire

1.8%$198,097Other

12.88%

$1,455,401Government/Corporate and other Non-Title Specific Models


INDEPENDENT AUDITOR’S REPORT

To the Members of The Canadian Copyright Licensing Agency

Opinion

We have audited the accompanying consolidated financial statements of The Canadian Copyright Licensing Agency, which comprise the consolidated statement of financial position as at December 31, 2019, and the consolidated statements of changes in net assets, operations and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

In our opinion, except for the effect of the matter described in the Basis of Qualified Opinion paragraph, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of The Canadian Copyright Licensing Agency as at December 31, 2019, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.

Basis for qualified opinion

In common with other reproduction rights organizations, the Corporation derives a portion of its revenue from license fees that are based on actual copies made at the licensees’ premises domestically and internationally, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification of these revenues was limited to the amounts recorded in the records of the Corporation, and we were unable to determine whether any increase might be necessary to license fees revenue, provision for royalties for distribution, excess of revenues over expenses for the year, accounts receivable, undistributed royalties and net assets.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Corporation in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Organization’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Organization or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Organization’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Organization’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Organization to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Organization and the organizations it controls to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

Toronto, Canada Chartered Professional AccountantsApril 2, 2020 Licensed Public Accountant


Consolidated statement of financial position(In thousands of dollars)December 31, 2019 2018

AssetsCurrent

Cash and cash equivalents $ 2,448 $ 1,366Investments (Note 3) 36,138 38,250Accounts receivable and prepaid expenses (Note 4) 1,587 1,651

40,173 41,267

Investments (Note 3) 22,871 21,436Capital assets (Note 5) 250 328

$ 63,294 $ 63,031

LiabilitiesCurrent

Undistributed royalties (Note 6) $ 9,708 $ 8,076Accounts payable and accrued liabilities 1,171 507Deferred revenue 1,822 1,746Deferred revenue – K-12 (Note 7) 24,873 28,127

37,574 38,456

Net AssetsNet assets invested in capital assets 250 328Net assets internally restricted for

contingencies (Note 10) 2,000 2,000Net assets internally restricted for tariff,

litigation and advocacy fund (Note 11) 6,432 6,293Net assets internally restricted for

development fund (Note 12) 2,204 3,404Net assets internally restricted for K-12

school tariff fund (Note 13) 788 788Unrestricted net assets 14,046 11,762

25,720 24,575

$ 63,294 $ 63,031

Commitments (Note 15)Contingencies (Note 16)Subsequent event (Note 18) On behalf of the Board

Director DirectorCameron MacDonald Gordon Dyer

See accompanying notes to consolidated financial statements.


Consolidated statement of changes in net assets(In thousands of dollars)Year ended December 31, 2019

Internally Internally Internally Internally Invested restricted for tariff, restricted restricted for capital contingencies litigation and development K12 school Unrestricted 2019 2018Net assets assets fund advocacy fund fund tariff fund Total Total Total (Note 10) (Note 11) (Note 12) (Note 13)

Balance, beginning of year $ 328 $ 2,000 $ 6,293 $ 3,404 $ 788 $ 11,762 $ 24,575 $ 25,290

Excess of revenues over expenses(expenses over revenues) for the year (99) - (376) - - 1,620 1,145 (715)

Interfund transfer(Note 11) - - 515 - - (515) - -

Interfund transfer(Note 12) - - - (1,200) - 1,200 - -

Investment in capital assets 21 - - - - (21) - -

Balance, end of year $ 250 $ 2,000 $ 6,432 $ 2,204 $ 788 $ 14,046 $ 25,720 $ 24,575

See accompanying notes to consolidated financial statements. See accompanying notes to consolidated financial statements.


Consolidated statement of operations(In thousands of dollars)Year ended December 31 2019 2018

RevenuesLicence fees $ 18,575 $ 11,116Interest income 949 800Unrealized (loss) gain on investments 856 (491)Other 81 94Realized gain on investments (9) 1 20,452 11,520

ExpensesOperational expenses

General and administrative 4,099 3,659 Professional fees 422 570Amortization of capital assets 99 76Travel, meetings, staff and directors’ costs 116 94Foreign exchange (gain) loss 192 (296)Tariff, litigation, and advocacy costs 376 374Development costs 1,073 224

6,377 4,701Distribution expenses

Provision for royalties for distribution 12,930 7,534

Total expenses 19,307 12,235

Excess of revenues over expenses (expenses over revenue) $ 1,145 $ (715)

Consolidated statement of cash flows(In thousands of dollars)Year ended December 31 2019 2018

Increase (decrease) in cash and cash equivalents

Operating activitiesExcess of revenue over expenses

(expenses over revenue) for the year $ 1,145 $ (715)Unrealized loss (gain) on investments (856) 491Amortization of capital assets 99 76

388 (148)

Change in non-cash components of working capital:Accounts receivable and prepaid expenses 64 (672) Undistributed royalties 1,632 549Accounts payable and accrued liabilities 664 130Deferred revenue (3,178) 234 (818) 241

(430) 93Investing activitiesPurchase of investments (40,559) (37,860)Proceeds on maturity of investments 42,092 26,152Purchase of capital assets (21) (318) 1,512 (12,026)

Increase (decrease) in cash and cash equivalents 1,082 (11,933)

Cash and cash equivalents, beginning of year 1,366 13,299

Cash and cash equivalents, end of year $ 2,448 $ 1,366

Cash and cash equivalents are comprised of:

Cash $ 2,092 $ 583Cash equivalents 356 783

$ 2,448 $ 1,366

See accompanying notes to consolidated financial statements. See accompanying notes to consolidated financial statements.


1. Organization

The Canadian Copyright Licensing Agency (the “Corporation”) is an organization whose purpose is:

a) To develop products and services that support the creation, production and use of copyright con-tent as an integral part of a healthy and sustainable reading, writing, researching, and learning ecosystem that is inclusive of all those who create, produce, use and value content.

b) To advocate for and increase understanding of the interests of creators, publishers and other copyright owners.

The Corporation has continued as a non-share capital corporation under the Canada Not-for-Profit Corporations Act as of May 7, 2014. The Corporation was originally incorporated under the laws of Canada by letters patent on August 23, 1988, without share capital. The Corporation is a not-for-profit organization with national jurisdiction excluding Quebec and, as such, is exempt from income taxes under 149(1)(l).

2. Summary of significant accounting policies

Basis of Accounting

The Corporation follows accounting policies that conform with the Canadian accounting standards for not-for-profit organizations. The following is a summary of significant accounting policies adopted by the Corporation in the preparation of the consolidated financial statements.

Principles of consolidation

The consolidated financial statements include the assets, liabilities and results of operations of the Corpo-ration and its wholly-owned subsidiary Prescient Innovations Inc (“Prescient”).

The Corporation is currently the sole member and only source of funding of the Access Copyright Founda-tion (the “Foundation”). The Corporation controls the Foundation but does not direct the allocation of grants.

The Corporation has decided not to consolidate the Foundation, and will instead provide the required disclo-sures (Note 9) in accordance with CPA Canada Handbook Section 4450.

Estimates and Measurement Uncertainty

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Items requiring significant estimates and subject to measurement uncertainty include the determination of the rate used to recognize Elementary, Secondary and Post-Secondary institution licence fee revenue, determination of the allowance for doubtful accounts receivable, useful lives of capital assets and impairment of capital assets. By their nature, these estimates are subject to measurement uncertainty. Actual results could differ from those estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in the statement of operations in the period in which they become known.

Revenue Recognition

The Corporation follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred.

Deferred capital contributions represent restricted government assistance received for the development or purchase of capital assets. This assistance is deferred and amortized to income on the same basis as the related capital assets.

Licence fees, other than those related to full-reporting licences, are recognized as revenue on a monthly basis, over the terms as specified in the licence agreements and when the criteria for revenue recognition has been met. Licence fee revenue applicable to future periods are recorded as deferred revenue.

Full-reporting licence fees, which are based on actual copies made at the licensees’ premises, are recog-nized as revenue when received or receivable if the amount to be received is confirmed by the licensees.

Cash and Cash Equivalents

Cash and cash equivalents represent cash on hand, bank balances and investments in guaranteed invest-ment securities with initial maturities of three months or less.

Capital Assets and Amortization

Capital assets are stated at cost less accumulated amortization. Amortization is provided at rates designed to charge to operations the cost of the capital assets, on a straight line basis, over their estimated useful lives, as follows:

Tangible Office equipment five years Computer hardware three years Leasehold improvements term lease

Intangible Computer software three years

When a capital asset no longer has any long-term service potential to the Corporation, the excess of its net carrying amount over any residual value is recognized as an expense in the statement of operations. Any write-downs recognized are not reversed.

Income taxes

Income taxes are accounted for using the taxes payable method. Taxes recoverable or payable and provision for income taxes are based on the corporate income tax returns filed. There is no adjustment for income taxes related to temporary differences and no recognition of the benefit of income tax losses carried forward, if any.

Undistributed Royalties

Undistributed royalties represent the balance of licence fees to be distributed to rights holders. The annual provision for royalties for distribution is dependent upon decisions made by the Board of Directors.

Foreign Currency Translation

Monetary assets and liabilities denominated in foreign currencies are translated to Canadian dollars at the exchange rate in effect at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at the rates in effect on the transaction date. Revenues and expenses denominated in foreign currencies are translated at the exchange rate in effect on the date of each trans-action. Foreign currency gains or losses are included in the determination of the excess of revenues over expenses for the year.

Financial Instruments

The Corporation’s financial assets and liabilities are comprised of cash and cash equivalents, investments, accounts receivable, undistributed royalties, accounts payable and accrued liabilities.

2. Summary of significant accounting policies (continued)

Notes to the consolidated financial statements(In thousands of dollars) December 31, 2019



Initial measurement

The Corporation’s financial instruments are measured at fair value when issued or acquired. For financial instruments subsequently measured at cost or amortized cost, fair value is adjusted by the amount of the related financing fees and transaction costs. Transaction costs and financing fees relating to financial instruments that are measured subsequently at fair value are recognized in operations in the year in which they are incurred.

Subsequent measurement

At each reporting date, the Corporation measures its financial assets and liabilities at cost or amortized cost (less impairment in the case of financial assets), except for equities, which consist of money market funds, quoted in an active market, which must be measured at fair value. The Corporation uses the effective interest rate method to amortize any premiums, discounts, transaction fees and financing fees to the statement of operations. The financial instruments measured at amortized cost are cash and cash equivalents, investment in bonds, notes and guaranteed investment certificates, accounts receivable, accounts payable, undistributed royalties and deferred revenues.

For financial assets measured at cost or amortized cost, the Corporation regularly assesses whether there are any indications of impairment. If there is an indication of impairment, and the Corporation determines that there is a significant adverse change in the expected timing or amount of future cash flows from the financial asset, the Corporation recognizes an impairment loss in the statement of operations. Any reversals of previously recognized impairment losses are recognized in operations in the year the reversal occurs.

3. Investments 2019 2018

The Corporation holds the following unrestricted investments:

Corporate bonds and notes, at amortized costInterest at various rates ranging from 1.12% to 3.50%per annum, maturing on various dates to Jun 14, 2019 $ - $ 816

Guaranteed investment certificates, at amortized costInterest at various rates ranging from 2.23% to 3.17% per annum, maturing on various dates to Jan 11, 2021 25,528 23,583

Equity instruments, at fair value 5,711 4,930

Fixed income funds, at fair value 3,106 2,968 34,345 32,297

The Corporation has internally restricted the following investments for the Elementary and Secondary Schools tariff:

Guaranteed investment certificates, at amortized costInterest at rate of 2.45% to 2.48% per annum, maturing on various dates to May 22, 2020 13,110 16,350

Fixed income funds, at fair value 11,554 11,039 24,664 27,389

Total investments 59,009 59,686Less: current portion (36,138) (38,250) $ 22,871 $ 21,436

4. Accounts receivable and prepaid expenses 2019 2018

Licence fees receivable $ 573 $ 750Other receivables 100 7Accrued interest 554 528K-12 tariff – accrued interest 205 224Prepaid expenses 155 142 $ 1,587 $ 1,651

Government remittances (other than income taxes) total $102 at December 31, 2019 (2018 - $16).

5. Capital assets 2019 2018

Accumulated Net Net Cost Amortization Book Value Book Value

Office equipment $ 281 $ (241) $ 40 $ 55Computer hardware 470 (369) 101 137Leasehold improvements 139 (30) 109 136Computer software 6,473 (6,473) - - $ 7,363 $ (7,113) $ 250 $ 328

6. Undistributed royalties 2019 2018

Balance, beginning of year $ 8,076 $ 7,526Provision for royalties for distribution 12,930 7,055Provision for royalties for distribution –

pending final certified tariff - 478 21,006 15,059

Distribution to rightsholders (11,298) (6,983)

Balance, end of year $ 9,708 $ 8,076

7. Deferred revenue – K-12 2019 2018

Balance, beginning of year $ 28,127 $ 27,883Annual deferred revenue and interest 829 244License fees recognized - K-12 (4,083) -

Balance, end of year $ 24,873 $ 28,127

The Copyright Board of Canada (“CBC”) does not always have certified tariffs for current years. If there is no certified tariff for the current year, the last certified tariff continues to operate on an interim basis and the Corporation may collect licence fees in accordance with the previous tariff until the proposed tariff is certified. The certified tariff may be different from the continuation tariff and could result in a higher or lower retroactive royalty adjustment.

2. Summary of significant accounting policies (continued)




Between 2010-2012, the Corporation invoiced the Elementary and Secondary Schools sectors (“K-12 sector”) based on the $4.81 per full-time equivalent (“FTE”) royalty rate of the 2005-2009 certified tariff. These royalties were paid by the K-12 sector in the years 2010, 2011 and 2012 while the CBC conducted its review of the proposed 2010-2015 tariff. The Corporation distributed royalties based on the last negotiated rate between the parties of $2.576 per FTE. The difference between the 2005-2009 certified rate and the last negotiated rate is set aside for possible future retroactive adjustments and is recoded as deferred revenue and segregated by the Corporation pending a final court decision described below.

On December 5, 2012, the K-12 sector notified the Corporation that they would stop paying royalties pursu-ant to the 2005-2009 certified tariff effective January 1, 2013.

On February 20, 2016, the CBC certified the 2010-2015 tariff and set royalties at $2.46 per FTE for the years 2010-2012 and $2.41 per FTE for the years 2013-2015.

On May 4, 2016, the K-12 sector (excluding Quebec) advised the Corporation that they maintained their status of not operating under the certified 2010-2015 tariff as of January 1, 2013. They requested refunds from the Corporation, having paid royalties at a rate of $4.81 per FTE under the certified 2005-2009 tariff for the years 2010-2012 (as compared to the rate of $2.46 that was set by the CBC for the 2010-2015 tariff for the years 2010-2012). The Corporation does not agree with the refund requested by the K-12 sector.

On October 25, 2016, the Corporation provided invoices to the K-12 sector that reconciled the royalties paid by the K-12 sector to the Corporation for the years 2010-2012 (as a consequence of the $2.46 FTE rate ultimately approved by the CBC) with the amounts owing by the K-12 sector for the years 2013-2015 under the 2010-2015 certified tariff. These invoices remain unpaid.

On February 21, 2018, the Ministries of Education for all the Provinces and Territories (except British Colum-bia, Ontario and Quebec), and all the school boards in Ontario (together, the “Consortium”) commenced legal action against the Corporation by serving a statement of claim. In their claim, the Consortium states that since they have opted out of the certified 2010-2015 tariff from 2013 onwards, the refund for the overpay-ment of fees paid for the years 2010-2012 should be paid in full and not set-off against the amounts owing for the years 2013-2015 under the 2010-2015 certified tariff. The Consortium also claims that tariffs certified by the CBC are not mandatory. The Corporation disagrees with the Consortium’s position. The Corporation has filed a statement of defence denying the allegations in the statement of claim and has counterclaimed to recover royalties from the K-12 sector for the period January 1, 2013 onwards.

No amounts have been accrued or adjusted related to the 2010-2012 and 2013-2015 tariff rates set by the CBC as a reliable estimate cannot be made until a final court decision has been rendered in relation to the legal action described above.

In 2019, events and conditions occurred that allowed the Corporation to recognize $4,083 of deferred revenue.

8. Post-secondary license revenue

On December 7, 2019, the CBC certified the Access Copyright Post Secondary Educational Institution Tariffs, 2011-2014 and 2015-2017; the royalty rates based on full time equivalent (FTE) are as follows:

Colleges Universities2011-2014 $9.54 per FTE $24.80 per FTE2015-2017 $5.50 per FTE $14.31 per FTE

The tariffs apply to retroactive periods. The royalty rates of the 2015-2017 tariff continue to apply to subsequent years until the next tariff is certified by the CBC. As at December 31, 2019, no amounts were recorded or received as a result of the certification of these tariffs. The terms of the tariffs required that Post-Secondary institutions calculate the amounts owed and make payment to the Corporation by March 9, 2020. Accompanying their payment, the Post-Secondary institutions are also required to provide a report setting out the FTE calculation used as the basis for the royalty calculation.

Subsequent to year-end, the Corporation received $2,286 of payments from various Post-Secondary institutions. Some institutions that submitted payment did not provide a corresponding report and the Corporation is following up. For the institutions that submitted a report, the Corporation is in the process of reviewing the report to confirm whether the calculations are correct. A preliminary review by the Corpora-tion indicates that some Post-Secondary institutions’ calculations are incorrect.

Some Post-Secondary institutions did not remit any payments and instead requested refunds totaling $2,050. As at the date these financial statements were finalized, several Post-Secondary institutions had not submitted anything to the Corporation.

No amounts were accrued or adjusted by the Corporation for its fiscal year ending December 31, 2019. The Corporation has three months from the receipt of information from Post-Secondary institutions to refund any monies owing, if necessary.

9. Related party transactions

Access Copyright Foundation

On June 25, 2009, the Corporation established the Access Copyright Foundation, a not-for-profit organiza-tion whose purpose is to promote Canadian culture through providing grants intended to encourage the understanding, development and promotion of literary and visual arts in Canada.

The Foundation was initially funded by an allocation of undistributed royalties in the amount of $3,237 rep-resenting a portion of licence fees received for which the rightsholders could not be identified. Commenc-ing in 2009, 1.5% of gross licence fees received by the Corporation were being allocated for contribution to the Foundation up to a specified maximum amount to be determined by the Board of Directors. In 2013 the Board of Directors, due to declining revenues, decided to suspend contributions until there was greater certainty around the value of rights that the organization administers on behalf of rightsholders. The Corporation is currently the sole member and only source of funding of the Access Copyright Founda-tion.

The Foundation has not been consolidated in the Corporation’s consolidated financial statements. Con-solidated financial statements of the Foundation are available upon request. Financial summaries of the Foundation as at December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018 are as follows:

7. Deferred revenue – K-12 (continued)



8. Post-secondary license revenue (continued)


Access Copyright Foundation (thousands of dollars) 2019 2018Statement of financial position

Total assets $ 3,280 $ 3,416

Total liabilities $ 5 $ 15Net assets 3,275 3,401 $ 3,280 $ 3,416Statement of operations

Total revenues $ 197 $ 18Total expenses 323 267

Deficiency of revenues over expenses $ (126) $ (249)

Statement of cash flowsCash from (used in) operations $ (219) $ (312)Cash from (used in) investing 212 237

Increase/(decrease) in cash equivalents $ (7) $ (75)

Prescient

On July 4, 2018, the Corporation established Prescient, a for-profit organization whose purpose is to explore and develop services supporting the future of rights management and content monetization. The Corpora-tion is currently the sole subscriber of the initial 100 Class A common shares of Prescient with an aggregate subscription price of $.01 and only source of funding of Prescient. The Corporation has appointed the directors and officers of Prescient.

Prescient has been consolidated in the Corporation’s consolidated financial statements. Development costs are being used to develop the Attribution Ledger and the two related use cases, Fanship and Imprimo.

10. Net assets internally restricted for contingencies

Net assets internally restricted for contingencies represent amounts designated by the Board of Directors to finance any material costs arising from the Corporation’s indemnifications as described in Note 16, and any future legal actions concerning the Corporation or brought by the Corporation against others in respect of alleged copyright infringements.

11. Net assets internally restricted for tariff, litigation and advocacy fund

Net assets internally restricted for tariff, litigation and advocacy fund represents 5% of gross licence fees received or receivable by the Corporation to finance costs of submitting applications to the Copyright Board of Canada (“CBC”) with respect to tariff disputes by licensees, other litigation and advocacy matters and defending any appeals resulting from CBC decisions.

12. Net assets internally restricted for development fund

Net assets internally restricted for development fund represents revenues to be applied to the development of new service offerings, marketing, communication and corresponding plans. During the year, an amount of $1,200 (2018 - $nil) was transferred to the unrestricted fund with board approval.

13. Net assets internally restricted for K-12 Schools tariff

Net assets internally restricted to fund amounts in dispute related to the February 19, 2016 Copyright Board of Canada decision for 2010 to 2012, and 2013 to 2015 tariff rates that are applicable to Elementary and Secondary Schools (K-12 Schools).

14. Financial risk management

Risk management relates to the understanding and active management of risks associated with all areas of the business and the associated operating environment. The Corporation’s financial instruments are primarily exposed to credit, interest rate and foreign currency risks.

Credit risk

Financial instruments that potentially subject the Corporation to concentrations of credit risk consist primarily of cash and cash equivalents, investments and accounts receivable.

Cash and cash equivalents consist of guaranteed investment certificates with a major Canadian financial institution and deposits with a major Canadian banking institution which may exceed federally insured limits. Investments consist of corporate bonds and notes, guaranteed investment certificates and money market funds which carry an investment grade credit rating and are administered by a major Canadian financial institution. The Corporation is exposed to concentration risk in that all of its cash is held with a few financial institutions, and the balances held are in excess of Canadian Deposit Insurance Corporation Limits.

Accounts receivable are primarily due from government and educational institutions and have high credit worthiness.

Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates will affect the fair value or future cash flows of a financial instrument because of changes in market interest rates. The Corporation is ex-posed to interest rate risk with respect to investments in fixed income securities and money market funds.

Other price risk

The Corporation is exposed to other price risk on its investment in equities quoted in an active market since changes in market prices could result in changes in the fair value of these instruments.

Foreign currency risk

The Corporation maintains a bank account and investments denominated in U.S. funds. As such, it is subject to foreign currency risk due to fluctuations in U.S./Canadian exchange rates. The following amounts, denominated in U.S. funds are translated at 1.2988 (December 31, 2018 – 1.3642) and are included in the following financial statement items: 2019 2018Cash and cash equivalents (U.S. dollars) $ 261 $ 156Investments – corporate bonds and GICs (U.S. dollars) $ 2,008 $ 3,080



9. Related party transactions (continued)


15. Commitments

The Corporation has entered into a lease agreement for the lease of its premises for terms expiring on November 30, 2023. The future minimum lease payments under the new lease are as follows:

2020 291 2021 291 2022 291 2023 267

16. Contingencies

In accordance with certain licence agreements, the Corporation indemnifies its licensees against any legal actions that may be brought against them as a result of their exercise of the permission granted therein. The Corporation is not aware of any outstanding claims with respect to the aforementioned indemnifications.

On February 21, 2018, the Consortium commenced legal action against the Corporation indicating that since they have opted out of the certified 2010-2015 tariff from 2013 onwards, the refund for the overpayment of fees paid for the years 2010-2012 should be paid in full and not set-off against the amounts owing for the years 2013-2015 under the 2010-2015 certified tariff. The Consortium also claims that tariffs certified by the CBC are not mandatory. The Corporation disagrees with the Consortium’s position. The Corporation has filed a statement of defence denying the allegations in the statement of claim and has counterclaimed to re-cover royalties from the K-12 sector for the period January 1, 2013 onwards. (See Note 7) It is management’s opinion that given the early stages of the legal proceeding, an estimate of recovery and value of licence fees for the years 2013 to 2019 cannot be made.

17. Capital management

The Corporation’s objectives when managing capital are:

a) To safeguard the Corporation’s ability to continue as a going concern.b) To maintain appropriate cash reserves on hand to meet ongoing operating costs.c) To invest cash on hand in highly liquid and highly rated financial instruments.

In the management of capital, the Corporation includes net assets in the definition of capital. The Corpora-tion manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets.

The Corporation is not subject to externally imposed capital requirements. There has been no change with respect to the overall capital risk management strategy during the year.

18. Subsequent event

Subsequent to December 31, 2019 the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in dif-ferent ways to address the outbreak. There are meaningful direct and indirect effects impacting businesses and we continue to monitor the impact COVID-19 has on the Corporation. The extent of the effect of the COVID-19 pandemic on the Corporation is uncertain.


2019 Access Copyright Board

Cameron Macdonald, Chair Grant McConnell, Vice-ChairGordon Dyer, TreasurerKelly DuffinDebbie HoganStephen HurleyMark LovewellKrys RossKelly ShawEric Enno TammRoanie Levy, President & CEO

Executive Team

Roanie Levy, President & CEOMichael Andrews, Chief Operating OfficerClaire Gillis, Chief Business Affairs Officer (on maternity leave)Sapanpreet Singh Narang, Chief Innovation OfficerAsma Faizi, Head of Legal Affairs

Management Team

Amy Cormier, Head of Communications & Marketing Rino Falcioni, Manager, Technology ServicesXin Ge, Manager, AccountingSilvia Grunberg, Head of Royalties and Client ServicesLeanne Newell, Head of Business DevelopmentStephen Sawyer, Lead, Design Research and Business Analysis

DIRECTORS, MEMBER ORGANIZATIONS & EXECUTIVE/MANAGEMENT TEAMS

Creator Member Organizations

Canadian Artists' RepresentationCanadian Association of Professional Image Creators Canadian Association of University Teachers Canadian Authors Association Canadian Society of Children's Authors, Illustrators and Performers Crime Writers of Canada Federation of British Columbia Writers League of Canadian Poets Manitoba Writers' Guild Outdoor Writers of Canada Playwrights Guild of Canada Professional Writers Association of CanadaSaskatchewan Writers' Guild The Writers' Union of Canada Writers' Alliance of Newfoundland and Labrador Writers' Federation of New Brunswick Writers' Federation of Nova Scotia Writers’ Guild of Alberta

Publisher Member Organizations

Alberta Magazine Publishers Association Association of Book Publishers of British Columbia Association of Canadian Publishers Association of Canadian University Presses Association of Manitoba Book Publishers Atlantic Publishers Marketing Association Book Publishers Association of Alberta Canadian Association of Learned Journals Canadian Publishers' Council Literary Press Group of Canada Magazine Association of BC Magazines CanadaMusic Publishers CanadaNews Media Canada Ontario Book Publishers Organization SaskBooks

34 Access Copyright – 2019 ANNUAL REPORT

ISSN: 1713-5664Access Copyright69 Yonge Street, Suite 1100 Toronto, Ontario M5E 1K3tel 416-868-1620fax 416-868-1621toll free 1-800-893-5777 www.accesscopyright.ca [email protected] Twitter: @AccessCopyright Facebook: @AccessCopyright

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